Aurelia Butler

BENGALURU (Reuters) – The U.S. dollar will claw back some of its recent losses over the coming three months on expectations financial markets have again gone too far in pricing in too many Federal Reserve interest rate cuts this year, a Reuters poll of foreign exchange strategists found.After rising about 5% for the year, the greenback lost more than half its gains against a basket of major currencies in recent weeks amid sluggish U.S. economic data fuelling expectations of multiple Fed rate cuts, starting in September.Much of those losses came following weaker-than-expected jobs data on Friday, which encouraged financial markets to project around 120 basis points worth of rate cuts in total from the three remaining Fed meetings this year, compared with 50 basis points just a few weeks ago.Several major banks, including primary dealers who deal directly with the Fed, followed suit in predicting more rate reductions than expected earlier.Yet with policymakers pushing back against speculation that recent weakness in economic data would translate into recession, markets may yet again be forced to temper their rate cut expectations.FX strategists in the monthly Reuters poll, conducted from Aug. 1-6 through recent market turmoil, predicted the euro, currently about $1.10, would fall about 1.4% to $1.08 by end-October, before rising to current levels in six months and then to $1.11 in a year.”Our strong dollar argument has certainly taken a big hit in terms of confidence, but is its strength truly over? That’s not our call,” said Paul Mackel, global head of FX at HSBC. “Our recession indicators are not flashing red. And even if the U.S. economy loses momentum, that usually spells bad news for other economies. The dollar does better in that environment.””Are markets getting carried away? Naturally, I’d say yes, but it’s difficult to stand in front of that speeding train in the very short term because this type of overreaction can persist,” Mackel added. “You need to be very careful when volatility is this high and you’re not used to it coming back so quickly.”MAJOR CUTBACK The Japanese yen, which started its latest upward march against the U.S. dollar after the Bank of Japan raised its overnight call rate to 0.25% on July 31 and announced a major cutback in its asset purchases going forward, hit a seven-month high of 141.7/$ on Aug. 5. It will hold on to its recent gains to trade at 144/$ in a year, the survey showed.Some FX analysts, however, attributed much of those gains to traders unwinding large volumes of carry trades – where investors borrow from economies with low rates to fund investments in higher-yielding assets elsewhere – which sent the Nikkei stock market index down more than 12% on Monday and then back up over 10% on Tuesday.The latest positioning data from the Commodity Futures Trading Commission (CFTC) before recent market volatility also showed speculators had slightly increased their net long bets on the U.S. dollar.Forecasters in previous Reuters polls, who for years have held on to their expectations of a weakening dollar, were split when asked if it was more likely the dollar would trade stronger or weaker than they predicted for the remainder of the year. A slight majority, 32 of 62, said stronger, while 30 said weaker.”Setting recent developments aside for a minute, we’re generally in the soft-landing camp and think once the U.S. economy starts to recouple with the rest of the world’s economies, we’ll see the dollar’s outperformance and more importantly, its overvaluation, start to normalize a bit going forward,” said Alex Cohen, FX strategist at Bank of America.(For other stories from the August Reuters foreign exchange poll click here) More

The move is the latest by Starboard, which disclosed a more than $500 million stake in Autodesk in June and lost a bid to appoint nominees to the company’s board in the run-up to an annual meeting last month.It said Autodesk’s board should “objectively assess” if CEO Andrew Anagnost, who has helmed the software maker for seven years, was the best choice to continue leading the company.Autodesk, which provides 3D design and engineering solutions for several sectors, did not immediately respond to a request for comment.Starboard is also pushing for cost cuts to improve profitability and said Autodesk should ensure executive compensation plan is tied to shareholder value creation.It added the “company must end its practice of setting annual targets for long-term executive compensation plans, a practice which has enabled compensation targets to be set below the multi-year targets that have been presented to investors.”Autodesk’s shares were 1.4% higher in premarket trading after dropping 2.4% on Monday amid a broad market selloff.Last month, Starboard said Autodesk’s management “intentionally” misled investors after the company disclosed an accounting issue earlier this year.Autodesk said in May that to meet free cash flow targets, it continued entering into multi-year, upfront contracts with enterprise customers through 2023 despite previously announcing a transition to annual billings a year earlier.CNBC reported on the latest Starboard move earlier on Tuesday. More

The recent U.S. jobs report showed slower job growth across most sectors, a drop in aggregate hours, and a higher unemployment rate. Despite these signals, the investment bank believes the fundamentals of the U.S. economy remain solid. Key metrics such as domestic final sales, retail sales, and personal income continue to show strength, supporting the view that the economy is not on the brink of recession.“If the Fed had known about this report a week ago, they might have eased in July,” the report notes, but adds that the bond market’s response has already partially fulfilled the Fed’s job, with 10-year yields rallying 40 basis points last week. Both Federal Reserve officials Barkin and Goolsbee have advised against overreacting to the jobs data.The bank also highlights the importance of upcoming data, with two Consumer Price Index (CPI) reports and another payroll report due before the September Federal Open Market Committee (FOMC) meeting. Barclays finds it unlikely that the Fed will make any drastic intra-meeting cuts.“An intra-meeting cut strikes us as highly irregular; short of an imminent financial crisis, it seems very unlikely,” strategists noted.Following the surprisingly weak jobs report, the market has priced in a 50-basis point cut for September, with options indicating a 20% chance of a 75-basis point cut and a 25% chance of 150 basis points in cuts by year-end.However, Barclays holds a different view, expecting the Fed to proceed more cautiously, cutting 25 basis points at each meeting starting in September, totaling 75 basis points by the end of the year.“We don’t expect Fed officials to push back on pricing this week, even if markets now have 128bp in cuts this year,” strategists said. “Rather, we think the Fed will depend on data to do that job; if the economy holds up as we (and it) expect.” More

The company also beat second-quarter profit estimates as consumer spending grew on hopes the U.S. economy would manage a soft landing, escaping a recession despite a tighter monetary policy to curb inflation. Separately, the company’s board approved a new $3 billion share repurchase, which FIS expects to complete by the end of 2024. FIS now expects annual adjusted profit between $5.03 and $5.11 per share, higher than its previous forecast of $4.88 to $4.98 and analysts’ estimate of $4.96, as per LSEG data. It also forecast higher-than-expected third quarter adjusted profit at $1.27 to $1.31 per share, compared with LSEG estimates of $1.26.For the second quarter ended June 30, FIS reported $754 million in adjusted net income from continuing operations, or $1.36 per share, compared with $454 million, or 76 cents per share, a year earlier. Analysts had expected a profit of $1.23 per share. Revenue from the banking solutions business, which offers core processing and transaction processing software to financial institutions, rose 3% from a year earlier to $1.71 billion in the quarter. More